Qwest will be sold to CenturyTel

Qwest is the Northwest's largest phone company, serving Portland, Seattle, Vancouver and many other communities across Oregon and Washington.

The region's other big phone company, Verizon Communications, is in the process of selling most of its operations in the state to a company called Frontier Communications Corp.

Qwest has 825 employees in Oregon and 2,640 in Washington.

The company has 802,620 phone lines in Oregon and 1.45 million lines in Washington.

Check back on this story all day long. It will be updated with information about customer impacts, regulatory approvals and employee reaction.

CenturyTel Inc., the country's fifth-largest local-phone company,
said Thursday that it will buy Qwest Communications International Inc.,
the third-largest, in a stock swap worth $10.6 billion to gain the
benefits of scale in a shrinking business.

The combined company would have about 17 million phone lines
serving customers in 37 states, but would still be dwarfed by AT&T
Inc. and Verizon Communications Inc. It would be based at CenturyTel's
headquarters in Monroe, La., rather than in Denver, where Qwest is
based.

The deal would shore up the combined company by helping it
reduce expenses and improve its ability to compete with cable. But it
would still be in the grip of a dismal trend:

The number of landlines in
the U.S. shrinks by about 10 percent per year as consumers chose to
rely on their wireless phones or service from cable companies. The
fourth-largest provider of landline phone service in the country, by
number of subscribers, is now cable company Comcast Corp.

Neither
Qwest nor CenturyTel own wireless networks that can compensate for the
loss of landlines, as AT&T and Verizon do. Last year, 22.7 percent
of homes used only cell phones, according to a survey by the Centers for Disease Control and
Prevention.

But Qwest and CenturyTel hope the
acquisition can make their combined company more competitive as a
provider of telecommunications services to businesses and expand the
reach of their broadband Internet service for consumers. It may also
provide TV services over phone lines to compete more aggressively with
cable, according to Glen Post, the CEO of CenturyTel, who would head the
combined company. CenturyTel has started providing TV services on a
small scale in some areas.

Analyst David Dixon at FBR Capital
Markets noted that the federal government is moving to shift subsidies
away from rural phone service and toward broadband lines. Rural phone
subsidies are a large source of revenue for CenturyTel, and the shift
could be a challenge.

The deal would likely to lead to job cuts at
the companies, which are already shedding positions. The Communications
Workers of America, the largest union in the telecommunications
industry, said it "looks forward to serious discussions" with both
companies. Qwest had 30,138 employees at the end of last year, while
CenturyTel had about 20,000.

Qwest provides traditional phone
service in 14 mostly Western states. Originally a long-distance and
Internet service provider, it bought US West in 2000 in a process that
started as a hostile takeover. US West was one of the seven "Baby Bells"
formed when the federal government broke up the AT&T monopoly in
the 1980s.

The government broke up the AT&T monopoly to foster
competition when landline phones were the prime means of two-way
communications in the country. Today, phone lines are declining in importance and
number, and the phone companies are combining, reversing the effects of
the breakup.

Qwest timeline

1999: After a five-week bidding war, Qwest agrees to buy US West in a stock deal valued at $34.7 billion.

2001: Qwest stock plummets as the company enters financial crisis, burdened by debt from a hyper-aggressive network buildout and the US West deal.

2002: Qwest shelves plans to share customer data with its business partners after fielding a half-million consumer complaints.

-- State regulators in the Northwest and elsewhere fine Qwest for poor customer service.

-- CEO Joseph Nacchio quits. Federal prosecutors indicted him in 2005 on insider trading allegations. He was convicted in 2007 and began serving his six-year prison term last year in Pennsylvania.

-- Under new CEO Richard Notebaert Qwest began the long process of reducing its debt.

2007: Qwest names Edward Mueller CEO.

-- In November, Qwest wins permission to offer cable TV service in Portland. A month later, Qwest gives up its plan.

The US West deal and accounting shenanigans in the
following years left Qwest struggling under a heavy debt load. Though it
has managed to shore up its finances substantially in recent years, it
was still an unlikely acquirer.

CenturyTel, on the other hand, has
an investment-grade credit rating, giving it the flexibility to buy the
larger Qwest. It was not part of the original AT&T system, and it
has expanded by buying up other, mostly rural, independent phone
companies. Last year, it bought Embarq Inc., the landline service
company once part of Sprint, giving it an urban presence as well.

To
reflect that deal, CenturyTel now does business as CenturyLink. It
provides service in 33 states, but its presence is small in most of
them. It's biggest in Florida, Nevada, North Carolina, Missouri, Texas,
Virginia and Wisconsin.

CenturyTel's Post said it had not been
decided which brand would be used after the acquisition, but he said
he's leaning toward using "CenturyLink" for the consumer business and
perhaps including the "Qwest" name when marketing to businesses.

CenturyTel
is offering stock worth about $6.02 per share for each Qwest share, a
premium of about 15 percent to Qwest's Wednesday closing price of $5.24.

Qwest
stockholders would receive 0.1664 CenturyTel shares for each share they
own and hold 49.5 percent of the new company, while CenturyTel
stockholders would own 50.5 percent of the business.

Ed Mueller,
the CEO of Qwest, pointed out on a conference call with investors and
analysts that Qwest shareholders would benefit from CenturyTel's higher
quarterly dividend if the deal goes through. Qwest's dividend is now
worth 32 cents per share. Under the terms of the deal, Qwest
shareholders would be getting the equivalent of 48 cents per share in
future dividends.

CenturyTel would also assume $11.8 billion in
Qwest debt.

Both companies' boards have approved the tax-free
acquisition, which is expected to close in the first half of 2011. They
expect the acquisition to save the combined company $625 million over
three to five years following the close of the deal.

The deal will
be reviewed by the Federal Communications Commission and either the
Justice Department or the Federal Trade Commission. State telecommunications
regulators will also examine the transaction.

Analysts said the
deal is likely to be approved by regulators because they mostly operate
in different areas. However, they could attach conditions, such as an
obligation to expand high-speed Internet access or to provide it at
certain prices.